Intercity Passenger Rail: The Congress Faces Critical Decisions  
About the Role of and Funding for Intercity Passenger Rail	 
Systems (25-JUL-01, GAO-01-820T).				 
								 
Congress is facing critical decisions about the future of the	 
National Railroad Passenger Corporation (Amtrak) and intercity	 
passenger rail because operating a national intercity passenger  
rail system as currently structured without substantial federal  
operating support is very unlikely. Thus, the goal of a national 
system much like Amtrak's current system and the goal of	 
operational self-sufficiency appear to be incompatible. In fact, 
Amtrak was created because other railroads were unable to	 
profitably provide passenger service. In addition, Amtrak needs  
more capital funding than has been historically provided in order
to operate a safe, reliable system that can attract and retain	 
customers. Developing a high-speed rail system is also costly,	 
requiring additional tens of billions of dollars. If intercity	 
passenger rail is to have a future in the nation's transportation
system, Congress needs to be provided with realistic assessments 
of the expected public benefits and resulting costs of these	 
investments as compared with investments in other modes of	 
transportation. Such analyses would provide sound bases for	 
congressional action in defining the national goals that will be 
pursued, the extent that Amtrak and other intercity passenger	 
rail systems can contribute to meeting these goals, state and	 
federal roles, and whether federal and state funds would likely  
be available to sustain such systems over the long term.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-820T					        
    ACCNO:   A01453						        
  TITLE:     Intercity Passenger Rail: The Congress Faces Critical    
             Decisions About the Role of and Funding for Intercity Passenger  
             Rail Systems                                                     
     DATE:   07/25/2001 
  SUBJECT:   Federal aid to railroads				 
	     Financial analysis 				 
	     Railroad industry					 
	     Program graduation 				 
	     Amtrak Metroliner Project				 
	     Amtrak Northeast Corridor				 
	     Amtrak Northeast Corridor High-Speed		 
	     Rail Program					 
								 

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GAO-01-820T
     
Testimony Before the Subcommittee on Railroads, Committee on Transportation
and Infrastructure, House of Representatives

United States General Accounting Office

GAO For Release on Delivery Expected at 10: 00 a. m. EDT Wednesday July 25,
2001

INTERCITY PASSENGER RAIL

The Congress Faces Critical Decisions About the Role of and Funding for
Intercity Passenger Rail Systems

Statement of JayEtta Z. Hecker Director, Physical Infrastructure Issues

GAO- 01- 820T

Page 1 GAO- 01- 820T Role of and Funding for Intercity Passenger Rail

Mr. Chairman and Members of the Subcommittee: We appreciate the opportunity
to testify today on issues surrounding the future of the National Railroad
Passenger Corporation (Amtrak) and intercity passenger rail, particularly
high- speed rail. Our statement will focus on three areas: (1) the uncertain
future of intercity passenger rail, (2) the expected large federal capital
costs to develop and maintain intercity passenger rail, and (3) the need to
assess whether the public benefits that might be realized justify such
investments. This statement is based on our recent reports on Amtrak?s
financial condition and highspeed rail issues, 1 others? reports, and
Amtrak?s finance and capital plans.

In summary:  It is very unlikely that Amtrak can operate a national
intercity passenger

rail system as currently structured without substantial federal operating
support. Amtrak is required by law to achieve operational self- sufficiency
by the end of 2002 or submit a plan for its own liquidation. The outlook for
it achieving operational self- sufficiency is dim. Amtrak has moved just $83
million closer to operational self- sufficiency in the last 6 years. By
December 2002- just 17 months from now- Amtrak must make another $281
million in financial improvements. Amtrak?s financial performance has not
improved so far this year: In the first 8 months of fiscal year 2001, its
revenues increased by $83 million over the same period last year but its
cash expenses increased by $120 million.  The level of federal capital
assistance that would be required to maintain

and expand the nation?s intercity passenger rail network far exceeds the
amounts that have been provided in recent years. Amtrak has called for $30
billion (in constant 2000 dollars) in federal capital support from 2001
through 2020 (an average of $1.5 billion each year) to upgrade its
operations and to invest as seed money in high- speed rail corridors. The
proposed amount is nearly $10 billion more than the $20.4 billion (in 2000

1 High Speed Rail Investment Act of 2001 (GAO- 01- 756R, June 25, 2001 ),
Intercity Passenger Rail: Assessing the Benefits of Increased Federal
Funding for Amtrak and High- Speed Passenger Rail Systems (GAO- 01- 480T,
Mar. 21, 2001), Intercity Passenger Rail: Decisions on the Future of Amtrak
and Intercity Passenger Rail Are Approaching (GAO/ T- RCED- 00- 277, Sept.
26, 2000), Intercity Passenger Rail: Amtrak Will Continue to Have Difficulty
Controlling Its Costs and Meeting Capital Needs (GAO/ RCED- 00- 138, May 31,
2000), Surface Infrastructure: High- Speed Rail Projects in the United
States (GAO/ RCED- 99- 44, Jan. 14, 1999 ), Letter to the Chairman,
Committee on the Budget, House of Representatives (Sept. 15, 1998), and
Amtrak: Issues for Reauthorization (GAO/ T- RCED- 95- 132, Mar. 13, 1995).

Page 2 GAO- 01- 820T Role of and Funding for Intercity Passenger Rail

dollars) that Amtrak has received in federal operating and capital support
over the past 20 years (1982 through 2001). In addition, costs to fully
develop the 10 federally designated high- speed rail corridors and Amtrak?s
Northeast Corridor could exceed $50 billion over 20 years, according to a
preliminary Amtrak estimate. Much of the funding could be expected to come
from the federal government.

 A number of benefits to the public and the national transportation system
have been attributed to intercity passenger rail service- such as reduced
congestion and increased travel choices. Yet, intercity passenger rail plays
a very small role in the nation?s transportation system today. If that role
is to expand, it is important for the Congress to have realistic assessments
of the expected public benefits and resulting costs, as compared to
investments in other modes of transportation. These assessments are
important because intercity passenger rail systems- like other intercity
transportation systems- are expensive.

With the growth in the nation?s highway and aviation systems in the previous
decades, intercity passenger rail service lost its competitive edge.
Highways have enabled cars to be competitive with conventional passenger
trains (those operating up to 90 miles per hour), while airplanes can carry
passengers over longer distances at higher speeds than can trains. The Rail
Passenger Service Act of 1970 created Amtrak to provide intercity passenger
rail service because existing railroads found such service unprofitable.
Like other major national intercity passenger rail systems in the world,
Amtrak has received substantial government support- nearly $24 billion for
capital and operating needs through fiscal year 2001.

Amtrak operates a 22,000- mile passenger rail system, primarily over tracks
owned by freight railroads. (See fig. 1.) Amtrak owns 650 miles of track,
primarily in the Northeast Corridor, which runs between Boston and
Washington, D. C. About 70 percent of Amtrak?s service is provided by
conventional trains; the remainder is provided by high- speed trains. 2 It
offers high- speed service (up to 150 miles per hour) on the Northeast
Corridor. About 22 million passengers in 45 states rode Amtrak?s trains in
2000 (about 60,000 passengers each day), a small share of the commercial

2 As measured by train- miles- the movement of a train for a distance of 1
mile. High- speed service is somewhat overstated because it includes some
trains that operate at 90 miles per hour or more on the Northeast Corridor
but at slower speeds off the corridor. Background

Page 3 GAO- 01- 820T Role of and Funding for Intercity Passenger Rail

intercity travel market. In comparison, in 1999, domestic airlines carried
about 1.6 million passengers per day, and intercity buses carried about
983,000 people per day (latest data available).

Figure 1: Amtrak?s Route Network

Source: Amtrak.

Proponents see high- speed rail systems (with speeds over 90 miles per hour)
as a promising means for making trains more competitive with these other
modes of transportation. 3 They see introduction of high- speed rail in
various areas of the country as a cost- effective means of increasing
transportation capacity (the ability to carry more travelers) and relieving
air and highway congestion, among other things. The Federal Railroad
Administration defines high- speed rail transportation as intercity
passenger service that is time- competitive with airplanes or automobiles

3 High- speed rail systems are generally of three types: (1) incremental
improvements to existing tracks, signaling systems, and grade crossings and
modern trains that permit speeds between 90 and 150 mph on existing rights-
of- way; (2) completely new infrastructure to support very- high- speed
operations of 200 mph or more; or (3) magnetic levitation systems that
permit speeds of around 300 mph. Typically, the cost to implement these
options grows as the sophistication of the technology and the speed
increase.

Page 4 GAO- 01- 820T Role of and Funding for Intercity Passenger Rail

on a door- to- door basis for trips ranging from about 100 to 500 miles. The
agency chose a market- based definition, rather than a speed- based
definition, because it recognizes that opportunities for successful
highspeed rail projects differ markedly among different pairs of cities.

High- speed trains can operate on tracks owned by freight railroads that
have been upgraded to accommodate higher speeds or on dedicated rights of
way. The greater the passenger train?s speed, the more likely it is to
require a dedicated right- of- way for both safety and operating reasons.
Ten corridors (not including Amtrak?s Northeast Corridor) have been
designated as high- speed rail corridors either through legislation or by
the Department of Transportation. (See fig. 2.)

Figure 2: Designated High- speed Rail Corridors and Amtrak?s Northeast
Corridor

Source: Federal Railroad Administration.

Designated corridors may be eligible for federal funds through several
Department of Transportation programs. According to the Department, the
designation also serves as a catalyst for sustained state, local, and public
interest in corridor development. The 10 federally designated corridors are
generally in various early stages of planning. Amtrak?s Northeast Corridor
is in operation and supports high- speed service up to 150 miles per hour.

Empire Corridor Northern New England Corridor Keystone

Corridor Northeast Corridor

Southeast Corridor

Florida Corridor Gulf Coast

Corridor South Central

Corridor Chicago Hub

California Corridor

Pacific Northwest Corridor

Montreal Portland/ Auburn Boston Albany

New York City Philadelphia Washington, D. C.

Hampton Roads Raleigh

Columbia Jacksonville

Orlando Miami Tampa Atlanta

Charlotte Louisville Indianapolis

Detroit Chicago Minneapolis/ St. Paul

Kansas City Tulsa Oklahoma City

Dallas/ Ft. Worth Los Angeles

San Diego Sacramento

San Francisco Bay Area

Eugene Portland

Seattle Vancouver

San Antonio Houston

St. Louis Mobile New Orleans Little Rock

Birmingham Buffalo

Cleveland Pittsburgh

Richmond

Page 5 GAO- 01- 820T Role of and Funding for Intercity Passenger Rail

Amtrak?s future is uncertain, in part, because it has made limited progress
toward achieving operational self- sufficiency, as required by the Amtrak
Reform and Accountability Act of 1997. The act prohibits Amtrak from using
federal funds for operating expenses, except for an amount equal to excess
Railroad Retirement Tax Act payments, after 2002. 4 If the Amtrak Reform
Council (an independent council established by the act) finds that Amtrak
will not achieve operational self- sufficiency, the act requires that the
railroad submit to the Congress a liquidation plan and the Council submit to
the Congress a plan for a restructured national intercity passenger rail
system.

Amtrak has made little progress in reducing its need for federal operating
assistance- i. e., closing its ?budget gap?- in order to reach operational
self- sufficiency. 5 In fiscal year 2000, Amtrak closed its budget gap by
only $5 million, achieving very little of its planned $114 million
reduction. Results for the first 8 months of fiscal year 2001 (October 2000
through May 2001) are not encouraging: Amtrak?s revenues increased by about
$83 million (6 percent) over the same period in 2000, but its cash expenses
increased by about $120 million (7 percent). 6 Overall, in the last 6 years
(fiscal years 1995 through 2000), Amtrak has reduced its budget gap by only
$83 million. By the end of 2002, about 17 months from now, Amtrak will need
to achieve about $281 million in additional financial improvements to reach
operational self- sufficiency. Although Amtrak has undertaken a number of
actions to reach and sustain operational selfsufficiency by the end of 2002,
we believe that it is unlikely that it will be able to do so.

4 Amtrak participates in the railroad retirement system, under which each
participating railroad pays a portion of the total retirement and benefit
costs for industry employees. According to Amtrak, excess railroad
retirement tax act payments are expected to be $196 million in 2003.

5 Amtrak defines its budget gap as the corporation?s net loss (total
revenues less total expenses) less capital- related expenses, including the
depreciation of its physical plant, other noncash expenses, and expenses
from its program to progressively overhaul railcars (i. e., to conduct
limited overhauls of cars each year rather than comprehensive overhauls
every several years).

6 Results are preliminary, subject to audit. Revenues increased from about
$1. 32 billion to $1.4 billion. Cash expenses (total expenses less
depreciation and other noncash expenses) increased from about $1.63 billion
to $1. 75 billion. The Future of

Intercity Passenger Rail is Uncertain

Page 6 GAO- 01- 820T Role of and Funding for Intercity Passenger Rail

Intercity passenger rail systems, like other intercity transportation
systems, are expensive. The level of federal financial assistance that would
be required to maintain and expand the nation?s intercity passenger rail
network far exceeds the amounts that have been provided in recent years. In
February, Amtrak?s capital and finance plans called for $30 billion (in
constant 2000 dollars) in federal capital support from 2001 through 2020 (an
average of $1.5 billion each year, with $955 million in fiscal year 2002) to
upgrade its operations and to invest as seed money in high- speed rail
corridors. The proposed amount is nearly $10 billion more than the $20.4
billion (in 2000 dollars) that Amtrak has received in federal operating and
capital support over the past 20 years (1982 through 2001). 7 The amount is
also nearly three times the annual amount that the Congress provided Amtrak
in recent years (e. g., $571 million for 2000 and $521 million for 2001 that
could be used for both capital and operating expenses).

Additionally, fully developing high- speed rail corridors would require
substantial amounts of federal capital assistance. Overall cost figures are
unknown because corridor initiatives are in various stages of planning.
However, the capital costs to fully develop the federally designated
highspeed rail corridors and the Northeast Corridor could be $50 billion to
$70 billion over 20 years, according to a preliminary Amtrak estimate. The
federal government could be expected to provide much of these funds.
However, estimates of the costs and the financial viability of high- speed
rail systems can be subject to much uncertainty, especially when they are in
the early stages of planning. 8

Some of the federal funding (as much as $12 billion) for high- speed rail
projects could be provided if the High- Speed Rail Investment Act of 2001
(H. R. 2329) is enacted. (A similar bill, S. 250, was introduced in the
Senate.) Amtrak views the bill as an important first step in providing seed
money and helping build partnerships with states, localities, and freight

7 In nominal dollars, the Congress provided Amtrak with about $16. 8 billion
from 1982 through 2001. 8 For example, in 1999, we found that ridership
estimates for the proposed Florida Overland Express project- to establish
high- speed rail service between Miami, Orlando, and Tampa- may have been
overstated by as much as 30 percent. It was unclear whether the project
could achieve its financial objectives of paying all operating costs,
repaying bondholders, and repaying federal loans if ridership was lower than
estimated by the project. (See GAO/ RCED- 99- 44.) The project was later
discontinued. Subsequently, Florida voters approved a ballot initiative
ordering the state to support a new high- speed rail effort. Intercity
Passenger

Rail Systems Will Require Substantial Amounts of Federal Capital Support

Page 7 GAO- 01- 820T Role of and Funding for Intercity Passenger Rail

railroads critical to the development of high- speed passenger rail in the
United States. According to Amtrak and Federal Railroad Administration
officials, several federally designated corridors could be ready for
infrastructure investment in the next year or so.

We agree that the bill offers the potential to facilitate the development of
high- speed rail systems outside the Northeast Corridor. However, issues
remain to be addressed if corridors are to realize the benefits that
proponents see for them, including how to complete projects where costs grow
beyond the bond funds made available for them. Further, in applying the
bill?s public benefit criteria, the Secretary and others will have to
address issues raised by a project that, by itself, is insufficient to
provide high- speed rail service on a corridor (or a portion of the
corridor). In these situations, one approach could be to require applicants
for bond funding to demonstrate that other resources could reasonably be
expected to be available to initiate such service 9 or that the project
would result in a

?useful asset? even if no other funding is provided. 10 There is growing
interest in and enthusiasm for intercity passenger rail by states,
particularly for high- speed rail systems. Proponents see opportunities for
increasing ridership- such as a quadrupling of riders on corridors other
than the Northeast Corridor (from 10 million to 40 million passengers
annually) by 2020. Proponents see a number of public benefits- such as
reduced congestion, improved air quality, increased travel capacity, and
greater travel choices- from further developing and expanding such systems.
According to the Federal Railroad Administration, 34 states are
participating in the development of highspeed rail corridors and these
states have invested more than $1 billion for improvements of local rail
lines for this purpose. As the Congress moves forward to define the role of
intercity passenger rail in our nation?s transportation framework, it needs
realistic appraisals of the level, nature, and distribution of public
benefits that can be expected to accrue.

9 In other contexts, the Transportation Equity Act for the 21st Century
requires states and metropolitan planning organizations to prepare short-
and long- range transportation plans including, among other things,
resources that can be reasonably be expected to be made available to
implement them.

10 The useful asset concept is embodied in an Office of Management and
Budget circular (A- 11), on the planning, budgeting, and acquisition of
capital assets. The Public Benefits of

Intercity Passenger Rail Need to Be Examined

Page 8 GAO- 01- 820T Role of and Funding for Intercity Passenger Rail

A public benefit cited to support the expansion of high- speed passenger
rail service is its potential to help relieve congestion in air travel and
on our nation?s highways. Such service might have some impact on congestion
if it were targeted to areas where roads are at or near their design
capacity, for example. As more traffic uses these roads, travel time
increases sharply and the delays are felt by all travelers. Expectations for
the extent to which intercity passenger rail can reduce congestion must be
realistic. For example, in 1995, we reported that each passenger train along
the busy Los Angeles- San Diego corridor kept about 129 cars off the highway
(about 2,240 cars each day)- a small number relative to the total volume. 11

Intercity passenger rail cannot be expected to ease congestion at airports
when long distance travel is involved because rail travel is not
timecompetitive with air travel. 12 For example, the scheduled travel time
for the approximately 700- mile distance between Washington, D. C., and
Chicago is about 2 hours for air and about 18 hours for conventional Amtrak
passenger trains. High- speed rail proponents believe that one potential for
high- speed rail is to replace shorter intercity air service, thus freeing
up airport capacity for longer- distance travel. High- speed rail may work
best for relatively short trips (of several hundred miles or less) where it
connects densely populated cities with substantial travel between the
cities. Amtrak?s Metroliner service, which travels up to 125 miles per hour
between New York City and Washington, D. C., is an example. The Metroliner
is one of only two Amtrak routes that made an operating profit in 2000. 13
Notably, the Federal Railroad Administration is supporting the development
of high- speed rail corridors that are competitive in travel time with air
and highway travel.

Another advantage cited for intercity passenger rail is that it is
energyefficient, thus improving air quality. For example, the Congressional
Research Service reported that Amtrak is much more energy- efficient than

11 See GAO/ T- RCED- 95- 132. 12 For a comparison of travel times for
Amtrak, bus, and air travel for several city pairs, see our September 15,
1998, letter cited in footnote 1. 13 According to Amtrak, the Metroliner?s
revenues exceeded its operating expenses by $65 million. The other Amtrak
route with revenues exceeding operating expenses was the Heartland Flyer,
with service between Oklahoma City and Dallas. On this route revenues
exceeded operating expenses by $700, 000. Payments by states comprised most
of the revenue ($ 5. 3 million); the remainder ($ 1.4 million) came from
train operations. Reducing Congestion and

Improving Air Quality

Page 9 GAO- 01- 820T Role of and Funding for Intercity Passenger Rail

air travel. 14 However, it also found that Amtrak is much less
energyefficient than intercity bus transportation and about equal in energy
efficiency as automobiles for trips longer than 75 miles. Our 1995 analysis
of the Los Angeles- San Diego corridor found that the increase in emissions
from added automobiles, intercity buses, and aircraft would be very small if
existing diesel- powered trains were discontinued.

Another cited advantage is that an investment in intercity passenger rail
can do more to increase transportation capacity than a similar expenditure
in another mode. For example, Amtrak recently suggested that a dollar
invested in intercity rail can increase capacity 5 to 10 times more than a
dollar invested in new highways, depending on location. 15 However, a 1999
study of the costs of providing high- speed rail, highway, and air service
in a particular corridor reached different conclusions. 16 This study found
that the investment costs (per passenger- kilometer traveled) of providing
highway and high- speed rail service between San Francisco and Los Angeles
were about the same, but both were substantially higher than the cost of
providing air service for the same route.

When considering increasing transportation capacity, federal, state, and
other decisionmakers will need to understand the extent to which travelers
are using existing capacity and are likely to use the increased capacity in
various modes. If new capacity is underutilized (e. g., because it is not
cost competitive or convenient), then the expected benefit will not be fully
realized.

Another benefit ascribed to expanding intercity passenger rail is increasing
travel choices- as an alternative to air, automobile, or bus travel. For
example, the Federal Railroad Administration estimates that the development
of the designated high- speed rail corridors could

14 Congressional Research Service, Amtrak and Energy Conservation (Jan. 19,
1999). The analysis was based on Btu per passenger mile results and took
into account variations in load factors, congested routes, and other factors
that would affect the outcomes in particular circumstances.

15 Strategic Business Plan, Feb. 2001. 16 Included in these costs were the
social costs of accidents, air pollution, noise, and congestion. See David
Levinson, Adib Kanafani, and David Gillen, ?Air, High- speed Rail, or
Highway: A Cost Comparison in the California Corridor,? Transportation
Quarterly, Vol. 53, No. 1 (Winter 1999). Increasing Transportation

Capacity Offering Travel Choice

Page 10 GAO- 01- 820T Role of and Funding for Intercity Passenger Rail

ultimately give about 150 million Americans (representing slightly over half
of the nation?s current population) access to one of these rail networks.
Yet travel choice entails more than physical access. To offer travel choice,
rail must be competitive with other travel modes: it must take travelers
where they want to go; be available at convenient times of the day; be
competitive in terms of price and travel time; and meet travelers?
expectations for safety, reliability, and comfort. For example, travelers
may view a rail system more favorably if it offers multiple trips- rather
than one or two round trips- each day and if it arrives and departs at
convenient hours.

The Congress is facing critical decisions about the future of Amtrak and
intercity passenger rail because operating a national intercity passenger
rail system as currently structured without substantial federal operating
support is very unlikely. Thus, the goal of a national system much like
Amtrak?s current system and the goal of operational self- sufficiency appear
to be incompatible. In fact, Amtrak was created because other railroads were
unable to profitably provide passenger service. In addition, Amtrak needs
more capital funding than has been historically provided in order to operate
a safe, reliable system that can attract and retain customers. Developing
high- speed rail systems is also costly, requiring additional tens of
billions of dollars.

If intercity passenger rail is to have a future in the nation?s
transportation system, the Congress needs to be provided with realistic
assessments of the expected public benefits and resulting costs of these
investments as compared with investments in other modes of transportation.
Such analyses would provide sound bases for congressional action in defining
the national goals that will be pursued, the extent that Amtrak and other
intercity passenger rail systems can contribute to meeting these goals,
state and federal roles, and whether federal and state funds would likely be
available to sustain such systems over the long term.

Mr. Chairman, this concludes our testimony. We would be pleased to answer
any questions you or Members of the Subcommittee might have. Observations

Page 11 GAO- 01- 820T Role of and Funding for Intercity Passenger Rail

For information about this testimony, please contact JayEtta Z. Hecker at
(202) 512- 2834 or at heckerj@ gao. gov. Individuals making key
contributions to this testimony were Helen Desaulniers, James Ratzenberger,
and Teresa Russell. Contact and

Acknowledgments

(542002)
*** End of document. ***